USD/JPY Price at 146.60 Near Breakdown as Fed Cut Bets Collide With BoJ Policy

USD/JPY Tests 146.50 as Political Turmoil in Japan Meets Fed Rate Cut Bets

The USD/JPY pair has retreated from the September peak near 149.14, dropping almost 1.9% to test the critical 146.50–146.70 support zone. This level aligns with the March swing low and the 38.2% retracement of the April advance, making it a decisive inflection point. A break below this band opens the path toward 145.83, while deeper losses could expose the 144.10–144.43 cluster tied to the July rally’s 61.8% retracement. Buyers will need to defend these zones aggressively to avoid confirming a broader bearish reversal.

Japanese Politics Fuel Yen Volatility

The sudden resignation of Prime Minister Shiger Ishiba has shaken confidence in Japan’s political stability. With Sanae Takaichi emerging as a likely successor and openly supporting Abenomics-style ultra-loose policy, the yen initially weakened on speculation that monetary tightening would be delayed. Yet, BoJ Deputy Governor Ryozo Himino signaled that rate hikes remain on the table, even if no firm timeline was given. This mixed backdrop has created erratic yen moves, with traders struggling to price how political shifts interact with BoJ policy direction.

Federal Reserve Cuts Now Fully Priced Into USD/JPY

The dollar side of USD/JPY is equally pressured. U.S. payroll revisions showed a downward adjustment of 911,000 jobs between April 2024 and March 2025, revealing far weaker labor conditions than initially thought. Friday’s jobs report added just 22,000 positions in August, fueling bets for aggressive policy easing. Markets now price in three Fed cuts by year-end, with a 12% probability of a 50 bps cut in September. The odds of dovish action have dragged Treasury yields lower, narrowing the U.S.–Japan 10-year yield spread to 2.48%, down from peaks above 4%, a major factor in the yen’s rebound.

Technical Picture Confirms Bearish Tilt in USD/JPY

From a chart perspective, the pair remains trapped between 146.50 and 149.00, but the technical bias is skewing lower. The 20-day and 50-day SMAs near 147.42–147.55 are fragile supports, while the 100-day SMA at 145.92 is now the next downside magnet. RSI has flattened around the neutral 50 line, reflecting indecision, but repeated failures at 149.12—the 61.8% retracement of the August decline—show sellers have capped upside momentum. A decisive breach under 146.28 would mark the start of a more extended downturn toward 142.25. On the upside, only a close above 149.12 revalidates bullish continuation toward 150.00 and 151.00.

Inflation Data to Provide the Next Catalyst for USD/JPY

U.S. inflation, due this Thursday, is expected at 2.9% year-over-year. A return above 3% would undermine expectations of multiple large cuts and could strengthen the dollar. If inflation remains tame, dovish Fed bets will gain further traction, reinforcing yen strength. Meanwhile, Japan faces its own CPI challenges, but the BoJ’s cautious stance—balancing inflation with fragile growth—suggests gradual policy adjustments at most. The interaction between U.S. inflation momentum and Japan’s evolving policy will decide whether USD/JPY sustains its hold above 146 or breaks down to new multi-month lows.

Whale and Insider Positioning Around USD/JPY

Institutional flows confirm the tug of war. Hedge funds and asset managers have scaled back long-dollar positions as U.S. yields retreated, while Japanese institutional investors continue repatriating funds, boosting yen demand. Insider moves across Japanese banks reflect expectations of higher BoJ rates in late 2025, while U.S. financial firms have slowed dollar accumulation, aligning with Treasury curve compression. This shift in flows mirrors the technical picture, reinforcing that downside pressure is mounting even without outright panic selling.

Verdict on USD/JPY

With the pair trading at 146.60, USD/JPY sits on the edge of a structural breakdown. The combination of weak U.S. jobs, fully priced-in Fed cuts, narrowing yield spreads, and political reshuffling in Japan tilts risks lower. Resistance remains capped at 148.70–149.12, while support at 145.83 and 144.10 is increasingly in play. Unless U.S. inflation reignites Treasury yields, the path of least resistance is bearish. Based on current data, USD/JPY is a Sell toward 144.00, with risk extending to 142.25 if BoJ policy surprises materialize in October.

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